Manufacturing output dips

Manufacturing output in the UK dropped in December, official figures revealed today, adding to concerns over the fragile position of the economy as it braces itself for the Government's spending cuts.

Manufacturing production dipped 0.1% on the month for the first time since April, driven by a decline in the output of building materials, the Office for National Statistics said.

Some economists said the severe weather in December - said to be the worst in 100 years - was likely to have hit the sector.

The wider industrial production measure increased 0.5% on the month in line with analysts' expectations, but the ONS said this was driven by a 6.1% hike in utilities, a volatile sector most likely driven by demand for electricity and gas as Arctic conditions took hold.

The figures are likely to raise fears that a resurgent period for the manufacturing sector, which has enjoyed more than half-a-year of growth on the back of increased demand at home and overseas, has come to an end.

Chancellor George Osborne has placed his hopes on private sector industry to offset the impact of his deficit-busting austerity measures.

Howard Archer, UK and European economist at IHS Global Insight, said the adverse weather was likely to have had a significant dampening impact on manufacturing.

He said: "Manufacturers currently look on course for a very good first quarter of 2011 despite December's dip in output.

"Nevertheless, the concern is that they will find life becoming more difficult as 2011 progresses as stock rebuilding draws to a close and tighter fiscal policy weighs on domestic demand."

Mr Archer said today's data meant an improvement in the 0.5% decline in fourth-quarter GDP figures, which will be revised later this month, was less likely.

The figures come a day after the ONS revealed the UK's trade deficit - the difference between goods exported and imported - hit a five-and-a-half year high in December.

David Kern, chief economist at the British Chambers of Commerce (BCC), said more needed to be done to back manufacturing and international trade.

He said: "The sector faces many challenges in the months ahead, not least coping with the impact of the Government's deficit-cutting programme.

"Given the uncertain background facing the economy, it is important to strengthen and reinforce the manufacturing recovery.

"In particular, businesses must be able to retain valuable skills and UK exporters should not be at a disadvantage in key areas such as trade finance, export insurance and trade promotion."